BHP and Rio face fresh tax threat in WA – by Tess Ingram and Peter Ker (Australian Financial Review – May 28, 2017)

http://www.afr.com/

Iron ore giants BHP Billiton and Rio Tinto are facing a fresh tax grab in Western Australia just months after seeing off the WA Nationals’ concerted push to slap the miners with a tax hike that would have cost them about $3 billion a year.

West Australian Premier Mark McGowan confirmed on Sunday the new Labor state government would ask BHP and Rio to “buy out” the 25ยข lease rental fee they pay on every tonne of iron ore produced to provide a potentially multibillion-dollar injection to government coffers.

At current production rates BHP and Rio would collectively owe WA about $150 million a year in lease rental fees, and while there was no clarity on the number of years’ fees WA wants paid up front, the bill would rise to $4.5 billion if the two miners paid 30 years’ worth of fees in a lump sum.

The highly conditional plan relies on approval from the state, the miners and the Commonwealth government, which Mr McGowan hopes would exclude any lump-sum payment from GST distribution calculations.

“All those negotiations and discussions have to occur and they haven’t occurred yet,” Mr McGowan said. The surprise move comes as the cash-strapped government searches for ways to repair its balance sheet, with state debt forecast to hit $42 billion by 2020. The budget deficit for 2017-18 has been forecast at around $1.6 billion by the McGowan government. The iron ore price slumped on Friday to $US57.91 a tonne, its lowest since October 17, 2016. The bulk commodity has averaged $US70.82 a tonne since July 1, 2016.

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